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Australian perspectives on global insurance marketsFri, 01 Dec 2017 05:16:24 +0000en-UShourly1https://wordpress.org/?v=4.7.7Norton Rose Fulbright/Henry Davis York combination now officialhttp://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/5IjTLgMGt6k/
https://www.insurancelawtomorrow.com/2017/12/norton-rose-fulbrighthenry-davis-york-combination-now-official/#respondFri, 01 Dec 2017 04:17:07 +0000https://www.insurancelawtomorrow.com/?p=1479Continue reading]]>We are excited to announce that Norton Rose Fulbright and leading Australian law firm Henry Davis York have now officially combined, to be known as Norton Rose Fulbright in Australia.

Together, we have created one of Australia’s largest and most dynamic providers of legal services.

The combination further expands our market-leading insurance capabilities. We now offer our insurance clients even greater scale and depth of expertise, including access to our new Canberra office.

We continue to be one of the few Australian law firms able to advise on almost every aspect of the insurance industry, across all segments and classes of business.

]]>https://www.insurancelawtomorrow.com/2017/12/norton-rose-fulbrighthenry-davis-york-combination-now-official/feed/0https://www.insurancelawtomorrow.com/2017/12/norton-rose-fulbrighthenry-davis-york-combination-now-official/ASIC’s enforcement priorities: what do they mean for insurers?http://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/DQeUzs0iq98/
https://www.insurancelawtomorrow.com/2017/11/asics-enforcement-priorities-what-do-they-mean-for-insurers/#respondThu, 09 Nov 2017 03:10:40 +0000https://www.insurancelawtomorrow.com/?p=1398Continue reading]]>ASIC has released its enforcement report for the period 1 January 2017 to 30 June 2017, which outlines ASIC’s enforcement results during the period. The report also provides an overview of some of ASIC’s enforcement priorities, the top three of which are:

(1) Gatekeeper culture and the ‘big end’ of town

ASIC continues to focus on the ‘gatekeepers’ of financial services, which include company directors and officers, auditors, insolvency practitioners and business advisors, as well as maintaining high standards of corporate governance by public companies.

Enforceable undertakings have been in vogue when dealing with poor gatekeeper culture and conduct by the big four banks. ASIC, for example, has utilised this enforcement tool recently to address inadequate systems and controls to prevent, detect and respond to inappropriate conduct in relation to a bank’s wholesale foreign exchange business.

With the number of investigations nearly halving, and ASIC’s enforcement compensation/remediation increasing from $13.4 million to a staggering $618.8 million from this period last year, it would appear that ASIC are focusing on the big end of town. This is supported by a substantial decrease in criminal charges laid and infringement notices issued.

(2) Cyber threats and technology-enabled offending

Given the spate of cyber attacks over the last 6 months, it comes as no surprise that cyber threats and technology-enabled offending are both front of mind for ASIC. ASIC has highlighted that the average cost of cyber crime to Australian companies is now estimated to be over $5.6 million per incident.

It appears that ASIC will pay particular attention to cyber threats in the context of rapid technological developments, such as digital disruptors operating in financial markets. This would include emerging data storage and fintech service providers, market participants who are vulnerable to unauthorised trading or market manipulation, and banking and payment systems that utilise electronic payment methods.

(3) Credit shift

Given the bullish property market, and the fact that household debt is soaring, it’s unsurprising that ASIC is focusing on responsible lending practices in the consumer credit industry. This focus will include assessing the information submitted by mortgage brokers to lenders (for example, fraudulent loans), and lender requirements to assess and verify a borrower’s financial circumstances.

This priority appears to follow APRA’s tightening of lending standards for residential mortgages in March 2017 in response to interest-only borrowings increasing to nearly 40% of all new loans.

A crackdown on consumer credit at the big end of town was confirmed by ASIC’s announcement in April 2017 that eight lenders will be forced to provide remediation, including possible refunds, to consumers who suffered financial difficulty as a result of breaches in past lending practices. In May 2017, ASIC announced that Motor Finance Wizard had signed an enforceable undertaking to pay consumers over $11 million in remediation over responsible lending concerns.

Implications for Underwriters and policyholders

Underwriters and policyholders ought to be aware of these enforcement trends. The key risk areas ASIC is seeking to address may have potential implications for the availability and coverage for fraud, insolvency, run-off or other misconduct under a PI or D&O policy.

However, it is noteworthy that wherever possible, ASIC will seek to recover investigation expenses and costs from persons who have caused those expenses and costs to be incurred (following the release of Information Sheet 204 Recovery of investigation expenses and costs in July 2015 and pursuant to their statutory powers). Notably, such expenses and costs are broad and may include salary costs of ASIC staff, external legal costs and the costs of engaging experts.

Given the complexity and protracted nature of these types of matters, ASIC’s investigation expenses and costs may be significant.

In a technologically advanced environment in which credit and financial service providers operate, businesses should regularly review their insurance policies and consider the scope of their cover and existing policy limits, in order to ensure they remain suitable.

]]>https://www.insurancelawtomorrow.com/2017/11/asics-enforcement-priorities-what-do-they-mean-for-insurers/feed/0https://www.insurancelawtomorrow.com/2017/11/asics-enforcement-priorities-what-do-they-mean-for-insurers/Insurance: necessary evil or social good?http://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/RePSoRdda9Y/
https://www.insurancelawtomorrow.com/2017/11/insurance-necessary-evil-or-social-good/#respondWed, 08 Nov 2017 05:38:09 +0000https://www.insurancelawtomorrow.com/?p=1394Continue reading]]>In Ireland, AIG recently cancelled the policies of numerous young drivers who persistently exceeded the speed limit. In New York, property and casualty insurer Lemonade has announced changes to their policies following the tragic Las Vegas massacre. And in Sweden, Skandia has developed an underwriting model to reduce long-term sick leave for corporates.

What do these three unrelated events have in common?

In each case, insurers are making decisions to help prevent risk, rather than simply insuring against it.

Historically, the insurance industry has helped eliminate certain risks. For example, insurers had a constructive role in founding the first fire departments, building codes and vehicle safety testing. And it was fire insurance companies which demanded the implementation of safe practices and the installation of hydrants.

Today, insurance continues to shape our lives. For example, insurers now reward individuals for being more active and maintaining a healthier lifestyle. And the insurance industry has a key role in lobbying governments for policy development on climate change.

The situations below illustrate in more detail how insurers can have an impact beyond their bottom line.

How AIG is trying to save lives

Using data gathered via telematics, AIG Ireland recently cancelled over 200 young drivers’ policies for persistent excessive speeding. (Telematics involves attaching a device to a car to monitor its location, movements and behaviour).

One driver had their cover cancelled after being detected driving at 193 km/hr on a motorway, and 197km/hr on a secondary road. In Australia, the Insurance Contracts Act arguably poses additional procedural challenges for insurers wishing to cancel a current insurance policy. However, Australian carriers are likely to follow the overseas lead.

AIG is now offering discounts to drivers who agree to have telematics devices installed in their cars. Importantly, the insurer is also calling for legislation to make it compulsory for drivers under 25 to carry these tracking devices, believing that many lives will be saved by making telematics mandatory.

Lemonade’s stance on firearms

Meanwhile, insurance start-up Lemonade has announced changes to their policy following the devastating Las Vegas shooting. For example, Lemonade will be adding more protection around firearms, such as excluding cover for assault rifles. The insurer will also add requirements that firearms be stored securely and used responsibly, and cover will be voided if these requirements are breached.

As Lemonade have blogged: “As an insurance company, it falls to us to shield our customers from damage to their guns, and by their gun. And so, we’ll continue crafting our policies for the vigilant gun owner, not the vigilante gun owner. The former are welcome, and will find our policies cover them fully; the latter aren’t and won’t.”

How Skandia helped reduce sick leave claims

In 2002, Nordic insurer Skandia had an unprecedented number of claims for long term sick leave insurance for corporate clients. So they began supporting research into how the healthiest corporates work. Skandia ended up developing a differentiated underwriting model for corporate health insurance, based on a diagnostic tool with questions for employees, and a rehab services network and hotline to prevent sick leave. By 2014, Skandia’s clients had 2% of their workforce on sick leave, compared to the national average of 7%.

The way ahead

The reality is that the insurance industry suffers the financial consequences of unsustainable practices, such as car crashes due to speeding, or gun violence, or increased sick leave claims. And yet, by developing new products and changing underwriting guidelines, insurers can alter their balance sheets and have a lasting positive social impact.

With the current emphasis on ESG principles, sustainability and social responsibility, expect to see more insurers helping to prevent risk, rather than just insuring it.

This was considered at a Norton Rose Fulbright panel discussion, “What does the future hold for cladding in Australia?”, by partners John Moran, Emmanuel Confos and Katherine Morris, and Christina Knorr, Chief Fire Engineer at Stephen Grubits & Associates.

The issue of cladding used on buildings has been brought into the global spotlight following the Grenfell fire in June 2017. If used in a certain way, cladding can speed up the spread of fire, causing a risk to occupants and the building structure. Cladding is commonly used to improve the appearance of buildings.

Legislation and proposed product recall powers

Katherine Morris outlined amendments to the Queensland Building and Construction Commission Act 1991 (QBCC Act) made by the Building and Construction Legislation (Nonconforming Building Products – Chain of Responsibility and Other Matters) Amendment Bill 2017 which was assented to on 31 August 2017.

The new measures, which are expected to be adopted as a model law by the other states and territories, include:

Chain of responsibility, which will impose obligations on all participants in the supply chain that led to the cladding being installed in an unsafe manner;

A positive obligation to ensure products safe and fit for purpose; and

An accountability mechanism where the QBCC can impose remediation orders. Liability may arise from failure to rectify or address issues.

Insurance implications

During the panel discussion, insurance partner John Moran provided an overview of the professionals and companies who may potentially be liable under both legislation and common law, and the policies which may respond.

Professionals vulnerable to exposure include building certifiers, builders, developers, architects, surveyors and valuers. Executive officers of these companies could also be potentially exposed.

The Victorian Building Authority conducted an audit of 170 high rise residential and public buildings in the wake of the Lacrosse fire of 2014. It found that not any one professional was consistently responsible for the use of non-compliant cladding, but that all potentially played a role.

In terms of insurance policies that may respond, John mentioned that the following could be exposed to cladding risk:

Property insurance policies that may cover damage and loss of life;

Professional indemnity policies that cover professionals;

Product liability and recall policies; and

D&O policies, depending on the level of knowledge possessed by executives.

Damage and loss caused by cladding also raises several issues that may arise during the assessment of a claim, and should be considered by Underwriters, such as:

Operation of aggregation clauses – what constitutes a single claim?

Limits – are insurers going to be willing to extend limits in light of the expensive nature of such claims?

Non-disclosure – was the risk of cladding known and disclosed prior to the inception of the policy? The insurer may look to apply the duty of disclosure in section 21 of the Insurance Contracts Act 1984, noting that s 54 of the Act enables the insurer to reduce the payout on a claim to the extent of prejudice it has faced due to the non-disclosure.

International scope – litigation could occur anywhere in the world, for example, the manufacturer may be based overseas and claims may be brought against it there.

John emphasised that this is not a new risk to insurers – it has been well known for some time. However, it has certainly been made more prominent due to media coverage. Some insurers are taking steps to limit their exposure to this kind of risk.

More information about non-conforming building products including cladding can be found here.

]]>https://www.insurancelawtomorrow.com/2017/11/another-hot-topic-for-insurers-is-combustible-cladding-the-next-big-risk/feed/0https://www.insurancelawtomorrow.com/2017/11/another-hot-topic-for-insurers-is-combustible-cladding-the-next-big-risk/Self-driving vehicles: hands on or hands off?http://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/5Mogbea3E18/
https://www.insurancelawtomorrow.com/2017/10/self-driving-vehicles-hands-on-or-hands-off/#respondTue, 31 Oct 2017 00:29:03 +0000https://www.insurancelawtomorrow.com/?p=1377Continue reading]]>90% of road accidents are attributable to driver mistakes. Yet, as Dr Mark Rosekind – Chief Security Innovation Officer at autonomous technology start-up Zoox, and Administrator of the US National Highway Traffic Safety Administration under President Obama – recently commented, “self-driving cars will not speed, or get drunk, or get drowsy, or make bad decisions”.

With the introduction of autonomous vehicles, the elimination of human error could see road accidents decrease significantly. So, what does this mean for insurers?

Impact on the insurance industry

In the face of such technological advances, the auto-insurance industry must prepare for the changing landscape of road safety. Forbes estimates that car insurance premiums in the United States will reduce by as much as 75%. But despite the many think-pieces lamenting the end of car insurance, things are not quite that straightforward.

Firstly, there is a misconception that autonomous vehicles will entirely remove human input from the driving process. Despite the hype, most of the so-called ‘self-driving’ cars on the brink of entering the market require some level of driver direction.

The focus on ‘self-driving’ may lead consumers to overly rely on a vehicle that is not as autonomous as an advertising campaign has led them to believe. This, in conjunction with the many non-autonomous vehicles which will share the streets for many years to come, has the potential to result in a period of increased motor accidents.

Secondly, while individual insurance premiums for personal injury and third party damage insurance are likely to decrease in time, the self-driving car’s reliance on technology introduces its own area of risk. Cybersecurity will become a primary concern in auto-insurance.

For example, in July 2015, security researchers hacked and remotely took control of a Jeep driving down a highway in the US. The incident resulted in 1.4 million Chrysler vehicles being recalled, and exposed a dangerous vulnerability posed by the incorporation of software in vehicles. Accenture Consulting estimates that by 2025, this new cybersecurity category will generate US$12 billion in car insurance in the United States.

Similarly, as the market drives technological competition and advances, product liability insurance for new vehicles and software will rise. Many of the developers of autonomous technology, such as Tesla and Volvo, have already committed to taking on that liability and incorporating insurance into the price of autonomous vehicles. And there is good reason for them to do that, as by far the safer assumption is that they will be exposed to product liability claims should incidents occur involving their vehicles.

With many self-driving cars requiring a degree of human interaction, the question remains: If an accident does happen in a self-driving car, who is liable – manufacturers of the self-driving car, or the consumer who contributed to the driving process?

As policymakers continue to consider these issues, insurers will need to continue to keep abreast of the changing landscape of the transport system. A hands-on approach by insurers will ensure they are well placed to tackle the changing risk environment as drivers look to take their hands off the wheel.

]]>https://www.insurancelawtomorrow.com/2017/10/self-driving-vehicles-hands-on-or-hands-off/feed/0https://www.insurancelawtomorrow.com/2017/10/self-driving-vehicles-hands-on-or-hands-off/When is it reasonable to reject a costs-protective offer? Trouble on the travelatorhttp://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/OMr7kDQUno0/
https://www.insurancelawtomorrow.com/2017/10/when-is-it-reasonable-to-reject-a-costs-protective-offer-trouble-on-the-travelator/#respondTue, 24 Oct 2017 00:49:18 +0000http://www.insurancelawtomorrow.com/?p=1374Continue reading]]>When is it reasonable for a plaintiff to reject a defendant’s costs-protective offer? This was the key issue for consideration in the case of Andrenacci v Australian Pacific Airports (Melbourne) Pty Ltd (Ruling No 2) [2017] VCC 864.

Facts

Ms A sued Australia Pacific Airports (APA) in relation to injuries she allegedly suffered when she slipped on a motionless travelator at Melbourne Airport in 2010.

Ms A was a registered dentist and her claim for economic loss was substantial, with future loss alone calculated as being between $1M and $1.8M. She reportedly sought damages in excess of $3M.

Trial was fixed for 22 February 2017. About 3 weeks prior to trial, APA served an Offer of Compromise for $100,000 inclusive of costs. Ms A did not accept the offer and the parties proceeded towards trial. However, the travelator of justice does not always run smoothly and the parties encountered a delay on the runway.

Delayed departure

Ms A sought to lead expert evidence from consultant engineer, Mr Mark Dohrmann. (Those familiar with the matter of Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd v Ors [2014] VSC 567 will remember that Mr Dohrmann found himself in hot water after several versions of his report, one of which appeared post-dated, emerged along the bar table mid-trial, leading to the Court making its own-motion inquiries into the conduct of Mr Dohrmann and various lawyers).

It must have been an unnerving déjà vu for Mr Dohrmann when APA objected to Mr Dohrmann’s report on the basis he had failed to comply with the Expert Witness Code of Conduct. APA alleged various problems with Mr Dohrmann’s report including: incorrect photographs; incorrect measurements; reference to outdated and irrelevant standards; and an alleged “cut & paste job” from various websites.

Ultimately, Mr Dohrmann’s report was excluded (Andrenacci v Australian Pacific airports (Melbourne) Pty Ltd [2017] VCC 188). The February trial date was vacated so that Ms A could find replacement expert opinion. However, by the time the new expert was engaged, the surface of the travelator had been changed.

The take off and a long-haul flight

The matter proceeded to trial in May 2017 and ran for 20 days before a jury. Ultimately, the jury found that APA had not breached its occupier’s duty of care.

APA’s bumpy landing

APA sought orders that Ms A pay its costs of the proceeding on a standard basis, and further, on an indemnity basis from 1 February 2017 (the day after the Offer of Compromise was served).

The Court acknowledged that the Rules created a presumption that the defendant is entitled to its costs on an indemnity basis, unless special circumstances exist which would lead to a departure from that presumption.

It noted Ms A’s argument that at no time prior to the jury’s verdict could her case have been regarded as hopeless or without merit, in part because some of the matters that would ultimately weigh against the plaintiff were not known to her advisors at the time of the offer was made.

The Court considered the following issues which occurred after the offer had lapsed:

the plaintiff’s new expert could only view the changed travelator surface;

surveillance film of Ms A was shown to various doctors, some of whom altered their previously supportive opinion about the plaintiff having seen the film; and

APA called a number of witnesses all of whom said there had been no other slipping incidents on the travelator.

The Court noted that had she accepted the offer of $100,000 inclusive of costs, Ms A would have been left with nothing “in her hands” and the offer was really just an offer to pay her costs; the offer:

“did not, in the circumstances of the potential judgement, represent a realistic attempt to sensibly negotiate and resolve a hard contested and complex case”.

With the benefit of hindsight, APA’s offer would have been an excellent outcome for Ms A. But the critical issue was whether or not it was reasonable for Ms A to refuse APA’s offer at the time it was made. Ms A did not know that her expert evidence was about to become weaker, that she had been captured on surveillance or that there would be oral evidence that no other similar incidents had taken place.

While defendants may think that a low offer just before trial, especially in a large claim, should be a clear warning to the plaintiff that the defendant may have a knock-out blow coming, the Court accepted that a plaintiff is reliant on advice, which will be based on the evidence available to the adviser.

This decision is a cautionary tale for defendants who must carefully weigh the risks of “tipping their hand” to make a plaintiff’s rejection of an offer seem unreasonable against the risk of losing forensic advantage at trial.

]]>https://www.insurancelawtomorrow.com/2017/10/when-is-it-reasonable-to-reject-a-costs-protective-offer-trouble-on-the-travelator/feed/0https://www.insurancelawtomorrow.com/2017/10/when-is-it-reasonable-to-reject-a-costs-protective-offer-trouble-on-the-travelator/Life insurers are not an employment agencyhttp://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/2Hakyo-JLgw/
https://www.insurancelawtomorrow.com/2017/10/life-insurers-are-not-an-employment-agency/#respondFri, 20 Oct 2017 03:44:43 +0000http://www.insurancelawtomorrow.com/?p=1372Continue reading]]>Assessing life insurance claims is a careful balancing act, weighing up the opinions of various medical experts and vocational assessors. Dotlic v Hannover Life Re of Australasia Limited [2017] NSWSC 986 provides some much needed colour to the shades of grey insurers face when considering expert evidence.

The Accident

Mr Dotlic immigrated from Bosnia to Australia in 2000 at the age of 19. He found work as a formwork labourer and became a member of the Construction and Building Unions Superannuation Fund, which was party to a group life policy issued by Hannover Life Re Australasia Limited (Hannover).

In 2009, Mr Dotlic was involved in a motor vehicle accident, suffering only minor head, shoulder and back injuries. He was admitted to hospital and released the same day. The extent of his treatment was physiotherapy and massage on referral from his general practitioner.

In 2012, Mr Dotlic claimed a Total and Permanent Disability (TPD) benefit of $100,000. The claim was assessed and subsequently declined by Hannover in 2014 on the basis that Mr Dotlic was able to return to suitable lighter duties within the scope of his education, training and experience (ETE). Mr Dotlic then commenced proceedings in the New South Wales Supreme Court against both Hannover and United Super Pty Limited (Trustee) as trustee for the Construction and Building Unions Superannuation Fund.

Was the insurer’s decision reasonable?

In order to succeed in the proceedings, Mr Dotlic needed to establish that the decision of Hannover and the Trustee to decline his claim was unreasonable based on the evidence then before them (following the cases of McArthur v Mercantile Mutual and Hannover v Sayseng).

In this instance the question was whether, after consideration of medical evidence satisfactory to Hannover, Mr Dotlic was unlikely ever to be able to engage in any Regular Remuneration Work (as defined in the policy) for which he was reasonably fitted by his ETE.

Pembroke J considered the established principles of reasonableness found in Edwards v The Hunter Valley Co-Op Dairy,TAL Life Ltd v Shuetrim and Minister for Immigration & Citizenship v Li, including that the decision of the insurer could not be attacked ‘[u]nless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer’ and that unreasonableness can be found where a decision ‘lacks an evident and intelligible justification’. He also cited the oft-quoted maxim ‘reasonable persons may reasonably take different views’.

Counsel for Mr Dotlic submitted that Hannover’s decision was so unreasonable that a reasonable person in its position would not have arrived at it. The basis for this submission was that Hannover and the Trustee had not addressed the question of whether, in the real world, the plaintiff was ever likely to obtain such work bearing in mind his injuries, limited English skills and his previous ETE. Further, Mr Dotlic contended that there was no labour market analysis to assess the likelihood of him obtaining any such employment.

In the course of assessing the claim, Hannover and the Trustee relied on voluminous medical and vocational reports that provided an optimistic but realistic prognosis. The vocational assessors were, according to His Honour, scrupulous in addressing the relevant issues and recommending employment categories.

On the other hand, His Honour drew attention to the ‘precious little’ that was provided to Hannover to support Mr Dotlic’s claim (being one report from Mr Dotlic’s general practitioner). That report certified that the GP did not believe that Mr Dotlic would ever be able to do a job for which he was reasonably fitted by ETE. The only support for this opinion was ‘chronic persisting symptoms resulting from injury on 15/9/2009’. His Honour questioned the veracity of that report, referring to his own reasoning in Zahr v TAL, that ‘… the usual, and entirely understandable starting premise of a medical practitioner is to accept and believe a patient’s account’.

His Honour ultimately found in favour of Hannover and the Trustee, on the basis that:

Hannover had more than enough material available to it, and there was an evident and intelligible justification for Hannover’s opinion based on that material;

a reasonable insurer would not have concluded that Mr Dotlic was unlikely ever to be able to engage in regular part-time or full-time employment for which he was reasonably fitted by ETE; and

there was no failure on the part of Hannover or the Trustee to have regard to the ‘real world’ in considering whether Mr Dotlic was unlikely ever to be able to engage in suitable employment.

No duty to find employment

What is interesting about this case is that His Honour not only considered the reasonableness of the insurer’s decision to decline Mr Dotlic’s claim, but he went one step further to state that an insurer has no responsibility to act as an employment agency.

In the penultimate paragraph of the judgement, His Honour refers to a Job Match Report obtained by Hannover, stating that ‘having identified appropriate vocational opportunities for the plaintiff, and taking into account the physical restrictions to which he was subject, there was no need to go further. And no need for the insurer to question the conclusions.’

Essentially, His Honour confined an insurer’s responsibility to forming an opinion about the probabilities of whether or not an insured is unlikely ever to engage in employment that they are suited for based on their ETE; and that an insurer ‘has no duty to find a particular job with a particular employer willing to take on the plaintiff’.

]]>https://www.insurancelawtomorrow.com/2017/10/life-insurers-are-not-an-employment-agency/feed/0https://www.insurancelawtomorrow.com/2017/10/life-insurers-are-not-an-employment-agency/Which principles should be applied when interpreting insurance policies?http://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/swyWbD73PNE/
https://www.insurancelawtomorrow.com/2017/10/which-principles-should-be-applied-when-interpreting-insurance-policies/#respondWed, 18 Oct 2017 22:04:59 +0000http://www.insurancelawtomorrow.com/?p=1367Continue reading]]>A recent Victorian Supreme Court decision has confirmed that a court, when interpreting a policy of insurance, will assess the matters by reference to the ‘natural and ordinary meaning’ of the word/clause. Simple, right? But determining the ‘natural’ or ‘ordinary’ meaning of words is not always straightforward and rarely receives universal acceptance.

Guastalegname v Australian Associated Motor Insurers Ltd [2017] VSC 420 provides a succinct summary of the principles to be applied when interpreting a policy of insurance.

The case concerned the interpretation of the soil movement exclusion in a Home Building Insurance policy. Under the policy, the insurer agreed to indemnify the policyholder in respect of loss, damage or destruction to the building caused by a number of insured events, including storm.

On Christmas Day 2011, a violent hail storm caused water to inundate the policyholder’s land and building. Water coursed around the building and pooled under and about the concrete slab. This led to ‘heave’ of the clay soil beneath the slab, causing the soil to expand and raise the slab. The raised slab lifted the walls and roof frames, causing cracking and other consequential damage to the building.

The policyholder made a claim under the policy for the cost of repairing the damage to the building. The insurer agreed that the storm caused the inundation, the consequent ‘heave’ in the soil supporting the concrete slab, and that such heave was the cause of the plaintiff’s loss and damage. However, the insurer denied liability to indemnify, on the basis of a general exclusion of liability for loss and damage to the building caused by ‘soil movement’.

In deciding this matter, the Court had to determine whether ‘heave’, which was accepted to mean the upward movement of the earth supporting a building because of the expansion of clay soil, fell within the ‘natural and ordinary meaning’ of the soil movement exclusion.

The exclusion stipulated that there was no cover for:

“damage, loss, cost or liability caused by or arising from or involving:

erosion or washing away of soil, earth or gravel,

the washing away or movement of the surface of any path or driveway which has a surface consisting of a loose material such as gravel, stone or dirt,

soil movement or settlement,

subsidence or landslide unless caused by the insured event of earthquake, …”

The Court determined it necessary to construe the relevant provisions of the policy in accordance with the general principles to be applied in giving commercial contracts a businesslike interpretation. The Court approached the task on the assumption that the parties intended to produce a commercial result and, accordingly, a commercial contract is to be construed so as to avoid “making commercial nonsense or working commercial inconvenience”: Electricity Generation Corporation v Woodside Energy Ltd (2014) 241 CLR 640.

So, the Court considered what reasonable persons in the position of the parties would have understood the words to mean by reference to the text of the agreement, the surrounding circumstances known to the parties and the purpose or object of the transaction. To the extent of any ambiguity, the Court adopted a common sense and non-technical approach and sought to give the agreement a commercially sensible construction.

As regards ‘heave’ and ‘soil movement’, the Court concluded that considering the policy as a whole, there was no reasonable basis for concluding that the parties intended the soil movement to have the limited meaning as proposed by the policyholder, and although the soil movement exclusion was badly drafted, it was clear that the insurer intended to exclude indemnity for building damage caused by soil movement of whatever kind.

Therefore, the Court concluded that the natural and ordinary meaning of the soil movement exclusion was that damage to the building caused by any kind of soil movement is excluded. “Heave” was found to fall within the natural and ordinary meaning of the soil movement exclusion and the insurer had reasonable grounds to rely upon the exclusion to decline indemnity for the rectification costs claimed by the policyholder.

This case provides insureds and insurance lawyers alike with a succinct summary (and a helpful refresher) on the principles that are to be applied when interpreting a policy of insurance, and confirms that in the end, the natural and ordinary meaning of a word is still the key to policy interpretation.

]]>https://www.insurancelawtomorrow.com/2017/10/which-principles-should-be-applied-when-interpreting-insurance-policies/feed/0https://www.insurancelawtomorrow.com/2017/10/which-principles-should-be-applied-when-interpreting-insurance-policies/Victorian Government considers a review of coronial investigation processeshttp://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/xHJ02pFUjTE/
https://www.insurancelawtomorrow.com/2017/10/victorian-government-considers-a-review-of-coronial-investigation-processes/#respondFri, 13 Oct 2017 03:19:22 +0000http://www.insurancelawtomorrow.com/?p=1364Continue reading]]>In December 2016, the Victorian Government announced that it had requested the Coronial Council of Victoria to undertake a review of the appeals and reopening processes for coronial investigations under the Coroners Act 2008 (Vic) (theAct).

The request was made to ensure that the laws are working appropriately, having regard to the interests of families, the history of the existing provisions and the operation of coronial legislation in other Australia states.

Cover for coronial investigations is available under many forms of insurance including general liability, PI, management liability and D&O. The potential changes are therefore likely to impact on local and overseas insurers who underwrite risks in Victoria.

The reopening provisions

The Victorian media has recently publicised community disquiet expressed in some high profile coronial investigations where it was thought by families of persons whose death were being investigated that the grounds of appeal under section 87(1) of the Act were too narrow, and the one month time period in which to appeal was too short.

Section 77 of the Act provides that an investigation may be reopened if the court considers there are new facts and circumstances and that it is appropriate to reopen the investigation. Factors to be taken into account include: the passage of time, the distress caused to interested parties and whether a reopening is desirable in the interests of justice.

The Law Institute of Victoria (LIV) has recommended that the reopening provisions in the Act should remain.

The appeal process

The more contentious issue relates to the grounds for appeal under section 87(1). The Supreme Court may allow an appeal if it is satisfied that it is necessary and desirable in the interests of justice to do so, but pursuant to section 87(2) an appeal can only be made on a question of law. This provision was intended to narrow the grounds for appeal to avoid unmeritorious appeals and unnecessary stress for the families of a deceased.

However, in other states, particularly in NSW and the ACT, the grounds for appeal are broader: they include an appeal in the interests of justice because of fraud, rejection of evidence, the irregularity of proceedings, insufficiency of an enquiry and the discovery of new evidence or facts.

An LIV submission noted that there had only been one appeal against a Coroner’s finding to the Victorian Supreme Court since the 2008 amendments. The LIV noted that, while it is important to achieve finality in any coronial investigation, and appeals as of right may undermine the community’s sense of reliability in those findings, this must be balanced against the needs of families of deceaseds and the interests of natural justice.

As for the time period in which to make an application for the reopening of an investigation of 28 days, there has been public concern that the time period was too short for parties to seek legal advice. The LIV recommended that this period be extended to three months.

The Act stipulates a period of six months from a Coroner’s determination for a party to appeal. As this is inconsistent with the other provisions in the Act, the LIV recommended that the time in which to appeal be reduced to three months from the date of the determination.

In our view, the LIV recommendations strike an appropriate balance between the rights of interested parties and the efficient determination and resolution of coronial investigations. Appeals or reviews of coronial findings are relatively rare in the court system, so it is unlikely these proposed changes will bring about applications for reopening or appeal that would be a burden to the court system.

Implications for insurance

For liability insurers and self-insureds who may fund the representation of their insureds at coronial investigations in anticipation of a subsequent liability claim, the proposed broadening of the appeal grounds may be welcomed. They provide additional and broader grounds to challenge an adverse finding made by the court. Conversely, if introduced, these expanded opening and appeal rights may expose a party to the cost of further review and investigation by the court at the instigation of a disgruntled interested person involved in the coronial investigation process.

]]>https://www.insurancelawtomorrow.com/2017/10/victorian-government-considers-a-review-of-coronial-investigation-processes/feed/0https://www.insurancelawtomorrow.com/2017/10/victorian-government-considers-a-review-of-coronial-investigation-processes/Millennials don’t have time for breakfast – so what do they have time for?http://feeds.lexblog.com/~r/InsuranceLawTomorrow/~3/Fw700bRUGTo/
https://www.insurancelawtomorrow.com/2017/10/millennials-dont-have-time-for-breakfast-so-what-do-they-have-time-for/#respondFri, 06 Oct 2017 03:56:15 +0000http://www.insurancelawtomorrow.com/?p=1356Continue reading]]>This was the topic of a panel discussion at Dive In 2017, the festival for diversity and inclusion in insurance.

On 28 September 2017, panellists James Harmer (JLT), Nikki Heald (Corptraining) and Demetrio Zema (Law Squared), along with moderator Reece Corbett-Wilkins (Norton Rose Fulbright), discussed how the next generation of professionals will change the landscape of the insurance industry, and what the established players must do to adapt and thrive in this new world.

Here are four take aways from the discussion on how the insurance industry can engage, attract and retain millennials.

1. Redefining Wealth

Millennials’ definition of wealth is different to that of a Baby Boomer’s or Gen Xer’s.

James explained that the next generation of workers are redefining the concept of wealth itself – by viewing wealth through the lens of accumulating experiences and affecting change, not in terms of dollars and cents. Opportunities to take international secondments or delve into charitable work are viewed just as favourably as large salaries and material possessions.

Further, the display of wealth is changing. In the age of social media, ‘Instagram-ing’ exotic foods indulged in abroad is akin to driving around in a sports car.

2. Think mentors, not managers

Millennials are (in)famous for their ambition and impatience – they want to reach the top, yesterday. However, millennials are also renowned for their fragile egos, caused by a trend of ‘doting parents’ and ‘participation awards’. Consequently, the new generation of workers demand a new style of management.

All three speakers agreed on the different expectations millennials have regarding mentorship in the workplace – regular feedback, affirmation, and clearly marked pathways for development are essential for ensuring millennials feel supported and well-equipped to succeed in their role. Any feedback needs to be delivered constructively.

Millennials also want to see merit, not seniority, dictate the dynamics of leadership. While they typically look to established mentors for career guidance, millennials expect to be listened to when they speak up on topics they are well placed to advise on. Age should be no barrier when sharing ideas. Nikki mentioned that millennials are in a unique position to educate non-millennials on how to use technology to better facilitate business, which is a key differentiating strength.

3. Work-life balance is dead

The Deloitte Millennial Survey 2017 observed that millennials really do want it all – freelancing and short-term contracts still play to millennials’ stereotypical impatience and restlessness…and yet, the allure of stable, full-time work remains strong.

Demetrio considered economic conditions to be central to this equation. Where the economy offers opportunities to take risks, the millennials will take them, but the anxieties of a post-GFC world have not been fully quelled. James agreed: while the going is good, a millennial today may want everything, whereas during a downturn, millennials may just be happy with a secure job.

The solution seems to be ‘work-life integration’. With a globalised world demanding that work hours contort around time zones, and millennials pushing for flexibility in working arrangements, 9-5 seems to be replaced by unique arrangements dictated by the demands of the clients and the business, not the clock. Weekend meetings and business breakfasts are fast becoming the norm.

4. Who is an ‘employer of choice’?

When asked what a millennial looks for in an employer, the panel reached consensus around one word: agility.

Considering the changing attitudes around the value of goods vs. experiences, around how managers interact with their employees and the rise of work-life integration, the one certainty is that the work landscape is changing. Employers must shift their focus towards fostering a culture of innovation, swift responses to the changing market and being on the forefront of technological change.

With millennials soon to make up the majority of not just the workforce but of the new consumer base, established companies must ask themselves whether they have the requisite agility to cater to these demands imposed by the new generation and remain ‘employers of choice’.

How the insurance industry – unanimously dubbed ‘conservative’ by the panel – responds to this challenge remains to be seen.